Typically remote terminals are used in stores to authenticate a credit card transaction at the point of sale, or to authorise a direct debit transaction. In New Zealand and some other countries such terminals are commonly referred to as EFTPOS (standing for “Electronic Funds Transfer Point of Sale” terminal). Other transactions of this type involve the use of automatic teller machines (“ATM”) in which the customer can withdraw money, or can arrange to transfer money from one account to another, or to obtain a statement of one or more of the customer's accounts. All of these transaction rely on some form of plastic card containing machine readable information. These cards are commonly called credit cards or debit cards. Depending upon how the cards are used, whether they are a typical “dumb card”or a “smart card” the user is required to authenticate the transaction by signing a document, typically a receipt or credit card form, or by entering a PIN (standing for “Personal Identification Number”) which the customer then has to remember and enter into the appropriate terminal at the appropriate time.
The plastic card is partly to identify the customer and the customer's account number. However it is an incomplete identification, requiring either the customer's signature or the entry of a PIN.
The problem with plastic cards of the credit or debit card type, is that such cards can be stolen, or misused. Relying on a customer's signature, and comparing the signature on the document to that on the credit card still allows for fraud, as the unauthorised user of the card may have practised the signature, and in many cases the merchant may not bother to compare the signature on the card or the signature on the receipt. Similarly with a debit card, the thief may have discovered the customer's PIN and may be able to access the account.
There is a need to reduce the risk of fraud associated with the theft or misuse of credit or debit cards, and yet still allow the customer the opportunity to conduct remote financial transactions making use of an ATM, or point of sale terminal when withdrawing money from a bank or shopping.